If you need a replacement or repair... you can do two ways..
1. They ship you a box and you return defective device, they either repair or send back a "like new" one to you.
2. Express repair... they place a hold on your credit card for value of device, they send you the "like new" replacement first and you send back old one within 10 days and they remove the credit card hold. They charge you for type of repair based on what your old device needed (but only up to the max AppleCare plus per incident charge).
Option 2 is nicest because you will always get a brand new device every time because they ship replacement first, but I think with option 1 they send out a new device also instead of repairing. Not sure on that though because say for example if you just wanted a screen replacement on the watch because it cracked, they may do just that somehow, but with an express repair you get new everything new eg. like new battery, and if case had a few scuffs on it etc. that would also be new because would be an entirely new watch. I think watches they probably replace for anything but I believe iPhones they may replace just a screen on your device you send in.